Dollar ETF in Two-Day Surge After Bernanke Comments

Currency ETFs News:

PowerShares DB US Dollar Index Bullish Fund (NYSEArca: UUP) was up sharply for the second straight day amid heavy trading volume Thursday on speculation the Federal Reserve will reduce its bond purchases later this year if the economy recovers.

The dollar fund was one of the few ETFs rising Thursday as global stocks, precious metals and bonds were hit after Fed chief Ben Bernanke said the central bank may ease off the gas pedal in terms of monetary stimulus.

“The U.S. dollar surged higher following the FOMC interest rate decision as the central bank struck an improved outlook for the world’s largest economy, and it seems as though the Fed is slowly moving away from its easing cycle as Chairman Ben Bernanke sees scope to moderate the asset-purchase program over the coming months. Indeed, Chairman Bernanke refrained from outlining a time horizon to taper the monthly purchases, but we will look for more clues on the pace the Fed will reduce the non-standard program as the central bank continues to drop its dovish tone for monetary policy,” said David Song, currency analyst at DailyFX.

“Although the Fed pushed back its forecast of seeing higher interest rates, it seems as though there’s a growing discussion to scale back on quantitative easing, and we may see the central bank halt its non-standard measure towards the end of the year as the economy gets on a more sustainable path,” he added. “In turn, the rebound in the USD should turn into a larger rally over the near-term, and the bullish sentiment surrounding the reserve currency remains poised to gather pace in the second-half of the year as the central bank adopts a more neutral to hawkish tone for monetary policy.”

UUP is rebounding after a one-month slide and is now positive for 2013.

The ETF follows the performance of the greenback against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

PowerShares DB US Dollar Index Bullish Fund

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